Playboy Cuts Web Staff; Launches In Korea

With online ad revenues down a whopping 65 percent in the second quarter, Playboy Enterprises is moving swiftly to reorganize its New York-based Playboy.com operations, a move that eliminates about a dozen employees.

The reorganization, which affects about 10 percent of the workforce, hit the online advertising/marketing sales departments hardest as the men's lifestyle magazine moved to eliminate "duplicative costs" and increase the selling of multi-media ad and sponsorship packages.

The company said the online staff would be integrated with the Playboy magazine ad sales group to improve margins and is aimed at bringing the Web operations to profitability in the second half of 2002.

In its second quarter earnings statement, Playboy said its Web division recorded negative EBITDA of $5.6 million, which was flat year over year. Excluding costs, the digital division narrowed its operating loss by approximately 20 percent, the company said.

Playboy.com, which depends heavily on advertising and fee-based subscription dough, said its revenue for the quarter was flat at $6.3 million, helped mostly by the fact that its Cyber Club subscription revenues offset the weak ad market and lower e-commerce revenues.

Playboy.com said it would push hard to migrate its free users to the premium subscription section of its site and plans to launch a new look and hire a new head of marketing to focus on customer acquisition and retention.

Separately, Playboy.com announced it had struck a two-year deal with Korea Telecom Hitel to develop its second international Web site. The site is expected to launch in fourth quarter this year.

Playboy.com said the Korean site would feature original editorial content catering to local interests s well as draw from Playboy's international
content including pictorials, streaming video features and live event coverage.

"A strong emphasis will be placed on video content, due to the proliferation and wide availability of streaming video technology in the Korean market. The new site will benefit from traffic generated by the more than 5,000 online information services and 2,320 online communities operated by Hitel," the company said in a statement.

It added that the Korean site would operate under the same multiple revenue stream model like Playboy.com, starting with advertising and the subscription-based Playboy Cyber Club, and then adding the Playboy Store, Playboy Auctions and other e-commerce initiatives. The base of operations will be Seoul, South
Korea.

Hitel is the Internet arm of Korea's largest fixed line provider and second
largest cellular operator, Korean Telecom.

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